SENATE BILL No. 241
AN ACT concerning restraint of trade; relating to restrictive covenants; providing that
certain restrictive covenants are not considered a restraint of trade and shall be
enforceable; amending K.S.A. 2024 Supp. 50-163 and repealing the existing section.
Be it enacted by the Legislature of the State of Kansas:
Section 1. K.S.A. 2024 Supp. 50-163 is hereby amended to read as
follows: 50-163. (a) The purpose of this section, and the amendments to
K.S.A. 50-101, 50-112, 50-158 and 50-161 by this act chapter 102 of
the 2013 Session Laws of Kansas, is to clarify and reduce any
uncertainty or ambiguity as to the application of the Kansas restraint of
trade act and applicable evidentiary standards to certain types of
business contracts, agreements and arrangements that are not intended
to unreasonably restrain trade or commerce and do not contravene
public welfare.
(b) Except as otherwise provided in subsections (d) and (e), the
Kansas restraint of trade act shall be construed in harmony with ruling
judicial interpretations of federal antitrust law by the United States
supreme court. If such judicial interpretations are in conflict with or
inconsistent with the express provisions of subsection (c), the
provisions of subsection (c) shall control. If a covenant that is not
presumed to be enforceable pursuant to subsection (c) is determined to
be overbroad or otherwise not reasonably necessary to protect a
business interest of the business entity seeking enforcement of the
covenant, the court shall modify the covenant, enforce the covenant as
modified and grant only the relief reasonably necessary to protect such
interests.
(c) (1) An arrangement, contract, agreement, trust, understanding
or combination shall not be deemed a trust pursuant to the Kansas
restraint of trade act and shall not be deemed unlawful, void, prohibited
or wrongful under any provision of the Kansas restraint of trade act if
that arrangement, contract, agreement, trust, understanding or
combination is a reasonable restraint of trade or commerce. An
arrangement, contract, agreement, trust, understanding or combination
is a reasonable restraint of trade or commerce if such restraint is
reasonable in view of all of the facts and circumstances of the particular
case and does not contravene public welfare.
(2) A covenant in writing in which an owner agrees to not solicit,
recruit, induce, persuade, encourage, direct or otherwise interfere with,
directly or indirectly, one or more employees or owners of a business
entity for the purpose of interfering with the employment or ownership
relationship of such employees or owners shall be conclusively
presumed to be enforceable and not a restraint of trade if the covenant
is between a business entity and an owner of the business entity and the
covenant does not continue for more than four years following the end
of the owner's business relationship with the business entity.
(3) A covenant in writing in which an owner agrees to not solicit,
induce, persuade, encourage, service, direct or otherwise interfere
with, directly or indirectly, a business entity's customers, including any
reduction, termination, acceptance or transfer of any customer's
business, in whole or in part, for the purpose of providing any product
or service that is competitive with those provided by the business entity
shall be conclusively presumed to be enforceable and not a restraint of
trade if the covenant is limited to material contact customers and the
covenant does not continue for more than four years following the end
of the owner's business relationship with the business entity.
(4) A covenant in writing in which an employee of a business
entity agrees to not solicit, recruit, induce, persuade, encourage, direct
or otherwise interfere with, directly or indirectly, one or more
employees or owners of a business entity for the purpose of interfering
with the employment or ownership relationship of such employees or SENATE BILL No. 241—page 2
owners shall be conclusively presumed to be enforceable and not a
restraint of trade if the covenant is between an employer and one or
more employees and the covenant:
(A) Seeks, on the part of the employer, to protect confidential or
trade secret business information or customer or supplier
relationships, goodwill or loyalty; or
(B) does not continue for more than two years following the
employee's employment.
(5) A covenant in writing in which an employee agrees not to
solicit, recruit, induce, persuade, encourage, direct or otherwise
interfere with, directly or indirectly, a business entity's customers,
including any reduction, termination, acceptance or transfer of any
customer's business, in whole or in part, for the purpose of providing
any product or service that is competitive with those provided by the
employer shall be conclusively presumed to be enforceable and not a
restraint of trade if the covenant is limited to material contact
customers and the covenant is between an employer and an employee
and does not continue for more than two years following the end of the
employee's employment with the employer.
(6) A provision in writing in which an owner agrees to provide
prior notice of the owner's intent to terminate, sell or otherwise dispose
of such owner's ownership interest in the business entity shall be
conclusively presumed to be enforceable and not a restraint of trade.
(7) Notwithstanding the presumption of enforceability provided in
subsections (c)(2) through (c)(5), an employee or owner shall be
permitted to assert any applicable defense available at law or in equity
for the court's consideration in a dispute regarding a written covenant.
(d) The Kansas restraint of trade act shall not be construed to
prohibit:
(1) Actions or proceedings concerning intrastate commerce;
(2) actions or proceedings by indirect purchasers pursuant to
K.S.A. 50-161, and amendments thereto;
(3) recovery of damages pursuant to K.S.A. 50-161, and
amendments thereto;
(4) any remedy or penalty provided in the Kansas restraint of trade
act, including, but not limited to, recovery of civil penalties pursuant to
K.S.A. 50-160, and amendments thereto; and
(5) any action or proceeding brought by the attorney general
pursuant to authority provided in the Kansas restraint of trade act, or
any other power or duty of the attorney general provided in such act.
(e) The Kansas restraint of trade act shall not be construed to
apply to:
(1) Any association that complies with the provisions and
application of article 16 of chapter 17 of the Kansas Statutes Annotated,
and amendments thereto, the cooperative marketing act;
(2) any association, trust, agreement or arrangement that is
governed by the provisions and application of 7 U.S.C. § 291 et seq.,
the Capper-Volstead act;
(3) any corporation organized under the electric cooperative act,
K.S.A. 17-4601 et seq., and amendments thereto, or which becomes
subject to the electric cooperative act in any manner therein provided;
or any limited liability company or corporation, or wholly owned
subsidiary thereof, providing electric service at wholesale in the state of
Kansas that is owned by four or more electric cooperatives that provide
retail service in the state of Kansas; or any member-owned corporation
formed prior to 2004;
(4) any association that is governed by the provisions and
application of article 22 of chapter 17 of the Kansas Statutes Annotated,
and amendments thereto, the credit union act; SENATE BILL No. 241—page 3
(5) any association, trust, agreement or arrangement that is
governed by the provisions and application of 7 U.S.C. § 181 et seq.,
the packers and stockyards act; and
(6) any franchise agreements or covenants not to compete.
(f) If any provision of this section or the application thereof to any
person or circumstance is held invalid, the invalidity does not affect
other provisions or applications of this section which can be given
effect without the invalid provision or application, and to this end the
provisions of this section are severable.
(g) As used in this section:
(1) "Employee" means a current or former employee that agreed
to a covenant in writing described in subsection (c)(4) or (c)(5).
(2) "Material contact customer" means any customer or
prospective customer that is solicited, produced or serviced, directly or
indirectly, by the employee or owner at issue or any customer or
prospective customer about whom the employee or owner, directly or
indirectly, had confidential business or proprietary information or
trade secrets in the course of the employee's or owner's relationship
with the customer.
(3) "Owner" means a current or former owner or seller of all or
any part of the assets of a business entity or any interest in a business
entity, including, but not limited to, a partnership interest, a
membership interest in a limited liability company or a series limited
liability company or any other equity interest or ownership interest.
(h) This section shall be a part of and supplemental to the Kansas
restraint of trade act.
Sec. 2. K.S.A. 2024 Supp. 50-163 is hereby repealed. SENATE BILL No. 241—page 4
Sec. 3. This act shall take effect and be in force from and after its
publication in the statute book.
I hereby certify that the above BILL originated in the
SENATE, and passed that body
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SENATE concurred in
HOUSE amendments _______________________
_________________________
President of the Senate.
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Secretary of the Senate.
Passed the HOUSE
as amended _________________________
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Speaker of the House.
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Chief Clerk of the House.
APPROVED _____________________________
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Governor.